With more loans, Punjab may end year with higher debt

Punjab has planned to borrow ₹9,847 crore in the fourth quarter and may end the financial year 2024-25 with a higher outstanding debt than estimated in the state budget.

The state government, which raises money from the market through the auction of government securities, has already taken a loan of ₹3,400 crore in the month of January. The remaining ₹6,447 crore is to be raised in February and March as indicated in the borrowing calendar shared by the state government with the Reserve Bank of India (RBI).

With this, the government is likely to end the year with a higher outstanding debt than the amount of ₹3.74 lakh crore indicated in the state budget. The state government has already raised a loan of ₹30,162.40 crore in the first 10 months, which amounts to approximately 99% of the net borrowing of ₹30,464.92 crore projected in the 2024-25 budget estimates, according to data on key fiscal indicators. A significant portion of these funds have been raised through the central bank’s banking solution, E-Kuber, following the borrowing calendar.

Principal secretary, finance, Ajoy Kumar Sinha said that the state government is borrowing with the approval of the central government and RBI.

“We cannot borrow more than what has been approved. The state has been allowed some additional borrowing,” he said without going into specifics.

Another finance department official stated that the projected borrowings mentioned at the time of the budget presentation were estimates.

Additional borrowing will be reflected in the revised estimates and actual accounts for the fiscal year, the official said, requesting anonymity.

The borrowing spree has raised concerns about Punjab’s growing debt, with the Opposition, particularly the Congress, accusing the government of ‘fiscal mismanagement’ and pushing the state into a ‘debt trap’. The ruling Aam Aadmi Party (AAP), on the other hand, has been blaming the previous governments’ profligacy, failure to make capital investments and inability to realise potential and non-tax revenues.

Debt-GSDP level set to surpass 50%: NCAER study

Among the most indebted states in the country, the debt situation of Punjab is likely to worsen as per the projections made by the National Council of Applied Economic Research (NCAER), an economic research think tank, in a new study.

NCAER, in the study, ‘The State of the States: Federal Finance in India’, released earlier this month, has stated that debt levels seem set to rise further with states like Rajasthan, Bihar, Himachal Pradesh and Kerala crossing 40% debt-to-GSDP ratio by 2027-28 and Punjab’s debt ratio going above the 50% mark. Punjab is estimated to add another 6.9% percentage points to take its debt level to 53.7% in 2027-28, according to the study.

Punjab saw the highest jump in its debt-to-GSDP ratio between 2012-13 and 2022-23, adding 15.6 percentage points to go from 31% to 46.8% during this period. At 8.2%, Punjab also had one of the highest effective interest rates on outstanding debt, it pointed out.

Pushing limits

Financial year Outstanding debt

2020-21 ₹2,58,032 cr

2021-22 ₹2,81,772 cr

2022-23 ₹3,14,220 cr

2023-24 (RE) ₹3,43,626 cr

2024-25 (BE) ₹3,74,091 cr